For a certain kind of money professional, there is a certain question that is decidedly unwelcome and comes up in a wide variety of social situations: Do you have any hot investing tips?
No. The answer is always no.
For financial advisors who think this way and those who work in similar industries, investing is necessary, but it may not be particularly interesting or enjoyable.
These professionals know how to invest and care about doing it right. But for them – and perhaps for you too – investing is simply a tool to help people achieve their most important goals. And helping people define those goals and then achieve them makes the job satisfying.
There’s nothing wrong with that. In fact, whether you’re managing your own finances or trying to find someone to work with who thinks the same way, it may be the healthiest way to think about money management.
Defiance requires courage
It may seem reasonable and even obvious to prioritize goals—and the ongoing, deeply meaningful conversations required to set and refine them—over detailed attention to the stock market. However, the financial services industry is struggling with this.
For decades, stockbrokers made more money trading stocks, which led to more deals and investment strategies. Many financial planners still base their fees on the assets they manage for you, resulting in too many conversations focused on how (and how aggressively) they invest those assets.
Therefore, it takes real courage for a financial professional to refuse discussions about investments or admit that the markets are not exactly brilliant.
“It definitely feels risky to say that in the newspaper,” said Danika Waddell, a financial planner in Seattle who first said it out loud in response to a challenge from Joy Lere, a psychologist and executive coach. You and Dr. Lere were on their way back from dinner at a conference when Dr. Lere asked her what she liked least about her job and what took the most energy.
People who are trying to navigate the world financially also need fortitude. You have to tune out the noise about how everyone is supposedly making a fortune with Nvidia or whatever the hot stock or fund is.
But how does one do it?
Dullness is a virtue
“I think investing should be boring,” said Leighann Miko, a financial planner with offices in Oregon and California. “We don’t want to put too much emphasis on it.”
The big idea here is that you take what different markets – stocks, bonds, real estate – offer you. This means you buy mutual funds or exchange-traded funds that own every security in a specific segment. A fund that tracks the S&P 500 stock market index owns all 500 of these stocks.
If you can handle more risk, you own more stock funds and hold less money, such as cash. However, you shouldn’t bet too much on a handful of individual companies or one market segment because guessing wrong can quickly erode your net worth. And it’s a guess.
The advantages of this approach are many. These market-focused funds have low fees and the overall portfolio is typically less volatile than individual stocks. In the long run, this approach should give you better returns.
Joy comes from different conversations
Buying boring, market-oriented index funds is now known as passive investing. There is some logic to this designation when you consider that people generally avoid getting in and out of markets when things get messy. Instead, stay on track and, for example, invest 80 percent of your retirement savings in stocks in the first 25 years of your career.
The nice thing about this is that it leaves time for more specific questions to ask yourself or a consultant. Which life situation would make you happier? What do elderly relatives need from you and how much do you have to donate? How do you best help your grandchildren? But asking and answering these questions is the opposite of passive.
“We make sure we actively plan for things that matter when people express their deepest and most important desires in life,” Ms. Miko said. “If you don’t know the purpose of money, how can you develop an investment strategy for it?”
Mike Zung, a financial planner in Lee’s Summit, Missouri, has little to say to the people he meets on social media about things like interest rate predictions. “I would rather hear about their first money memories and how partners make money together,” he said.
This is a somewhat unconventional request for a stranger, but it is not taboo for a friend. A good friend of someone who doesn’t have access to professional money help might want to investigate—and try to help—if they can find the right conversational approach.
“I want to know what their current and future ideal life looks like and make sure their financial situation supports that,” said Ms. Waddell, who recently spoke with a client who believes working as a therapist might have been a better career Selection.
Is changing jobs too late for someone in their 40s? Maybe not. And other big pivot points in life?
“There will be one or two things that are quite critical,” Ms Waddell said. “And for most people, they won’t invest.”
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2024-06-22 04:00:04
www.nytimes.com
